Best of the Week
Most Popular
1. Dollargeddon - Gold Price to Soar Above $6,000 - P_Radomski_CFA
2.Is Gold Price On Verge Of A Bottom, See For Yourself - Chris_Vermeulen
3.Dow Stock Market Trend Forecast 2018 - Nadeem_Walayat
4.Gold Price to Plunge Below $1000 - Key Factors for Gold & Silver Investors - P_Radomski_CFA
5.Why The Uranium Price Must Go Up - Richard_Mills
6.Dow Stock Market Trend Forecast 2018 - Video - Nadeem_Walayat
7.Jim Rogers on Gold, Silver, Bitcoin and Blockchain’s “Spectacular Future” - GoldCore
8.More Signs That the Stock Market Will Rally Until 2019 - Troy_Bombardia
9.It's Time for A New Economic Strategy in Turkey - Steve_H_Hanke
10.Fiat Currency Inflation, And Collapse Insurance - Raymond_Matison
Last 7 days
Gold – “Make Me Feel Good…Tell Me Anything” - 25th Sept 18
Sector Rotation Continues. Bullish for Stocks - 25th Sept 18
Whose Trillion is it Anyway? US Federal Government Shocker! - 25th Sept 18
Focus on the Stock Market’s Price Action and Ignore the Failed Hindenburg Omen - 25th Sept 18
5 Problems All Restaurant Owners Will Face - 25th Sept 18
Gold Price Trend Forecast 2018 - Video - 25th Sept 18
How the US Dollar Penalizes Emerging Asia - 24th Sep18
Stock Market Macro/Macro View: Waves and Cycles Part II - 24th Sep18
DJIA Makes New High  - 24th Sep18
Gold Price Trend Forecast 2018 - 24th Sep18
The Stock Market Has Been Exceptionally Strong this September. What’s Next for Q4 2018 - 24th Sep18
Gold / US Dollar Inverse Trend Relationship Video - 23rd Sep 18
US and Global Stocks, Commodities, Precious Metals and the ‘Anti-USD’ Trade - 23rd Sep 18
Gerald Celente Warns Fed May Bring Down the Economy, Crash Markets - 23rd Sep 18
Top 3 Side Jobs for Day Traders - 23rd Sep 18
Gold Exodus to Reverse - 22nd Sep 18
Bitcoin Trader SCAM WARNING - Peter Jones, Dragons Den Fake Facebook Ads - 22nd Sep 18
China Is Building the World’s Largest Innovation Economy - 21st Sep 18
How Can New Companies Succeed in the Overcrowded Online Gambling Market? - 21st Sep 18
Golden Sunsets in the Land of U.S. Dollar Hegemony - 20th Sep 18
5 Things to Keep in Mind When Buying a Luxury Car in Dubai - 20th Sep 18
Gold Price Seasonal Trend Analysis - Video - 20th Sep 18
The Stealth Reason Why the Stock Market Keeps On Rising - 20th Sep 18
Sheffield School Applications Crisis Eased by New Secondary Schools Places - 20th Sep 18
Precious Metals Sector: It’s 2013 All Over Again - 19th Sep 18
US Dollar Head & Shoulders Triggered. What's Next? - 19th Sep 18
Prepare for the Stock Market’s Volatility to Increase - 19th Sep 18
The Beginning of the End of the Dollar - 19th Sep 18
Land Rover Discovery Sport 'Approved Used' Bad Paint Job - Inchcape Chester - 19th Sep 18
Are Technology and FANG Stocks Bottoming? - 18th Sep 18
Predictive Trading Model Suggests Falling Stock Prices During US Elections - 18th Sep 18
Lehman Brothers Financial Collapse - Ten Years Later - 18th Sep 18
Financial Crisis Markets Reality Check Now in Progress - 18th Sep 18
Gold’s Ultimate Confirmation - 18th Sep 18
Omanization: a 20-year Process to Fight Volatile Oil Prices  - 18th Sep 18
Sheffield Best Secondary Schools Rankings and Trend Trajectory for Applications 2018 - 18th Sep 18
Gold / US Dollar Inverse Correlation - 17th Sep 18
The Apple Story - Trump Tariffs Penalize US Multinationals - 17th Sep 18
Wall Street Created Financial Crash Catastrophe Ten Years Later - 17th Sep 18
Trade Wars Are Going To Crash This Stock Market - 17th Sep 18
Why Is Apple Giving This Tiny Stock A $900 Million Opportunity? - 17th Sep 18
Financial Markets Macro/Micro View: Waves and Cycles - 17th Sep 18
Stock Market Bulls Prevail – for Now! - 17th Sep 18
GBPUSD Set to Explode Higher - 17th Sep 18
The China Threat - Global Crisis Hot Spots & Pressure Points - 17th Sep 18 - Jim_Willie_CB

Market Oracle FREE Newsletter

Trading Any Market

Interest Only Mortgage Time Bomb Warning from the CML

Housing-Market / Mortgages Oct 26, 2017 - 03:46 PM GMT

By: Kavinesh_A

Housing-Market The Council of Mortgage Lenders (CML) has provided a fresh warning that millions of homeowners who had taken out a Interest only mortgage to purchase their home many years ago are now facing the prospect of losing their home when there mortgage product reaches it’s expiry. The debate of an Interest only mortgage ticking time bomb has been rumbling on for many years but things have become more apparent this week as the Council of Mortgage Lenders highlighted that up to 1.9 million homeowners are going to start reaching the end of their mortgage lifespan and asked to pay the outstanding balance of what they owe. Unfortunately for many people who took out their mortgage 20 years ago they are now approaching retirement age and therefore seen as being too old to take out another mortgage product.




Nowadays, with many first time buyers joining the property ladder far later in life the issue of mortgage terms expiring presents a further problem. Restrictions in the length of mortgage products offered start occurring for buyers at the age of 45 who may start to find that they only have access to shorter mortgage terms and will therefore have higher monthly payments. Furthermore, banks are increasingly applying stricter lending criteria and the days of cheaper interest only mortgages are almost over with only around a fifth of new mortgages being interest only.

So how did this all begin

Interest only mortgages started to become popular during the 90’s with many home buyers preferring the option to only service the interest portion of their mortgage each month and in turn having much smaller monthly mortgage payments. The problem of being left with outstanding debt once the mortgage term expired was also addressed at the time with the offering of an endowment policy which was far cheaper than paying down the capital and would supposedly better invest your money into funds that will be used to pay off the remaining capital at the end of the mortgage term. However, the problem that many face is that their endowment policy hasn’t been as successful as initially intended and isn’t worth enough to cover the outstanding mortgage. The endowment policy problem has been wildly reported in recent years and many people have received compensation for being miss-sold, in fact to such an extent that in 2016 the Financial Ombudsman announced that endowment policy’s where the second most complained about investment product.

For many home buyers mortgage providers insisted that an endowment policy must be connected to the interest only mortgage that was offered at the time. However, this wasn’t always the case and those who solely took out a interest only mortgage are left with the task of having to find the money to pay the entire outstanding loan, for those in this situation what are the options available:

Options available

Sell and Downsize – Unfortunately many homeowners will have to sell their beloved home and downsize. Luckily enough property prices have increased so much over the past 20 years that they should have a good amount of equity that they can use to buy a new home. For those who don’t have much equity and still need to sell their house fast there are companies who allow you to sell for 100% market value and this could be a good route that will satisfy your mortgage lender that you have taken a proactive approach. Whichever way you manage to achieve a sale you will still be forced to move and then use your remaining equity to live in a new area or house that will probably not be as desirable as you have been used to.

Endowment Policy – As mentioned many people who are reaching the end of their mortgage term will have an endowment policy in place but this may not be enough to cover the amount owed. Over recent years over 2 billion has been paid out in compensation claims and the route of claiming compensation for the miss-selling of an endowment policy could be taken. It has been the responsibility of Endowment Policy lenders to issue “High Warning” Letters in good time before the end of the mortgage term and depending on whether or not the policy holder received this warning and how long since the warning letter was received you may or may not be able to claim. The Financial Ombudsmen Endowment policy claim time limits can be seen here.

Equity Release Loan – Rather than selling up and spending your equity on a new property it may be a more comfortable option to apply a equity release charge on your home to pay off the remaining debt. This will be a loan that is paid off when you die and the house is sold. You do initially need to have enough equity in your property to cover the original mortgage loan and also enough to take into account Interest that will accrue over the forthcoming years. Even though you won’t need to make any monthly payments these loans can have a high level of interest and will put a dent into any inheritance that you have intended to pass on.

Alongside these above three options there are other possibilities available that a good financial advisor could recommend if you are faced with this sticky situation.

By Kavinesh

© 2017 Kavinesh - All Rights Reserved

Disclaimer: This is an paid advertorial. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules